Puerto Rico Resolution: Let It Go. They Have.

In 2012 the majority of Puerto Rican citizens expressed a desire to separate from the United States, and their resolution in regard to effective self-government has earned them that independence.

The U.S. territory of Puerto Rico, acquired from Spain during the nascent development years of American global power, has enjoyed the benefits of free travel, trade and U.S. citizenship for over a century (see addendum below).  Between the decades-old trend of migration to the U.S. mainland, atrocious local governance, wide-spread tax evasion/corruption, and the weaning off of generous business subsidies, the Commonwealth is in deep over its head in debt.

Debt per person far outstrips any US state

Debt vs domestic output isn't looking so hot either

Additionally, this small island of nation-wannabees recycles less than 11% of its trash (as of 2013 compared to the 34.3% U.S. average), is rapidly approaching its land-fill capacity, and drains raw sewage and garbage into its canals and bays - it is literally in the crapper.

Perhaps it'll kill the Zika mosquito larvae?

The individual economics compared to the mainland U.S. are not pretty either.  Over 27% of Puerto Ricans are on welfare with only 43% actually working - numbers that don't even come close to the levels in troubled Greece, let alone the U.S.  A high percentage of its citizenry simply lives off U.S. Social Security, U.S. government pensions and way too many government jobs.  For those with jobs, paying taxes appears to be optional.  Over 45% are below the U.S. poverty line, 35% are on Food Stamps (while even Mississippi only hovers at 21%), and they are giving Wisconsin a run for its money in the obesity category.  Just how much federal money makes the one-way trip from mainland taxpayers to Puerto Rico is hard to imagine. ** & ++

Puerto Rico, like a boat, seems to be just a hole in the water into which we pour money

But it's the debt issue that looms large today.

At $73 billion with no solution in site, Puerto Rico's governor simply said they can't pay.  Unfortunately, he's right.  They've been living large (or on largesse) for decades and not making changes such that there's no climbing out of the pit without a good deal of relief.  One caveat is that Puerto Rico, like U.S. states, can't declare bankruptcy (as much as some legislators have proposed allowing this as a solution - The Case for Allowing U.S. States to Declare Bankruptcy).  Even more interesting is that part of the debt is "constitutionally guaranteed," meaning that portion must be repaid before anything else, such as school/pension/police/medical moneys.  Essentially, the government of Puerto Rico kept ratcheting up the bond rates and making ever more substantial payback warranty promises until the note came due, and now they're calling for a bailout of sorts from their sordid mess. 

Oh yeah, there's also $43.2 billion in unfunded pension liabilities. 

Puerto Rico's representatives have essentially pressed the U.S. government to either make it a state or set it free.  Over 96% of its citizens endorse one of these two positions, and, as noted above, 54% voted in favor of independence in a 2012 national referendum.

To become the 51st state requires not only (presumably) the consent of the citizens there, but majority approval in both houses of Congress.  It is doubtful that the latter will ever be achieved, given the severe lack of movement in that direction these last 100 years.  And, as outlined above, there's Puerto Rico's present economic status - bringing to the table only debt, undeserved pension obligations, and little chance for growth.  That doesn't mean it can't be competitive operating as a separate entity, but it will take more application and ingenuity than it has shown thus far.

Puerto Rico does show promise compared to its Caribbean brethren

The reasons for retaining Puerto Rico as a Commonwealth have long since passed and it's time we let it go. 

States can’t declare bankruptcy (and the U.S. already has Illinois and NJ, so we have our quota of the economically-challenged and corrupt).   Puerto Rico is well past the point of no return and any “rescue” should be the last before granting independence.  That should be done with some deference to not turning out all the lights, but no more than that, given the mess PR brewed entirely for itself.  As much as Democrats like to blame "greedy" creditors, PR is – presumably – a fully capable government, not some poor unaware farmhand being offered a too-good-to-be-true mortgage.

Citizens of PR who choose to remain there will become just that – Puerto Rican citizens; no longer statutory US citizens.  Visitation will proceed as with any other country where immigration may need to be controlled (i.e. visas, deportation as necessary).  The majority will have gotten what it wants, but independence comes at a price.

Historical background and references
Other territories ceded by Spain to the U.S. in the Spanish-American War included Hawaii, Guam and the Philippines, as well the untethering of Cuba. The Philippines representatives in Congress expressed their will to be an independent nation around 1916.  After some political wrangling, prepping the territory to run itself, and a little World War II (where the U.S. freed it from Japanese occupation), it became independent in 1946.

Puerto Rico became a Commonwealth of the United States, a territory under the territorial clause in the Constitution.  Its recent demographic history consists largely of a steady exodus of its citizens to the mainland - there are now more Puerto Ricans on the mainland U.S. than the 3.5 million in PR.  A respite of sorts occurred in 1976 when Section 936 of the Tax Code set up substantial tax incentives to companies doing business in PR.  The largely U.S.-subsidized growth in GDP that followed did not last, as businesses "not paying their fair share" were castigated by the Clinton administration in the 90's, resulting in his phasing out the tax break over a 10 year period.  A PR recession ensued in the midst of this, along with more mainland flight, and hasn't improved for a variety of reasons.




Continuous catalog of news articles on Puerto Rico:  Madagascar Development blog

George Will editorial connecting the fiscal decisions on Puerto Rico with the worsening state of Illinois:  What Happens in Puerto Rico Won't Stay There